United States District Court, D. South Dakota
CATHEDRAL SQUARE PARTNERS LIMITED PARTNERSHIP; WEST PARK LTD.; 46th STREET PARTNERS LIMITED PARTNERSHIP; and RIVERVIEW PARK, LTD., Plaintiffs,
SOUTH DAKOTA HOUSING DEVELOPMENT AUTHORITY, Defendant and Third-Party Plaintiff,
SHAUN DONOVAN, Secretary, United States Department of Housing and Urban Development, Third-Party Defendant
For Cathedral Square Partners Limited Partnership, Riverview Park, LTD, 46th Street Partners Limited Partnership, West Park, Ltd., Plaintiffs: Joel D. Vos, LEAD ATTORNEY, Heidman Law Firm, Sioux City, IA.
For South Dakota Housing Development Authority, Defendant: Michael L. Luce, LEAD ATTORNEY, Murphy Goldammer & Prendergast, LLP, Sioux Falls, SD.
For South Dakota Housing Development Authority, ThirdParty Plaintiff: Michael L. Luce, LEAD ATTORNEY, Murphy Goldammer & Prendergast, LLP, Sioux Falls, SD.
For Shaun Donovan, Secretary, United States Department of Housing and Urban Development, ThirdParty Defendant: Kyle A. Forsyth, LEAD ATTORNEY, U.S. Department of Justice - Civil Division, Civil Division, Washington, DC.
MEMORANDUM OPINION AND ORDER RE: MOTION FOR PARTIAL DISMISSAL OF THIRD-PARTY COMPLAINT
Lawrence L. Piersol, United States District Judge.
South Dakota Housing Authority, having claimed that it is " caught in the middle" between Plaintiffs and the United States Department of Housing and Urban Development (HUD) on the issues raised by the Plaintiffs in their Second Amended Complaint against South Dakota Housing Authority, filed a third-party complaint against HUD on June 10, 2008, alleging claims for violation of the Administrative Procedure Act, breach of contract, and declaratory judgment. This Court granted HUD's motion to dismiss on March 30, 2009. See Cathedral Square Partners Ltd. P 'ship v. South Dakota Hous. Dev. Auth., 679 F.Supp.2d 1034 (D.S.D. 2009). This Court then resolved the issues presented by the Plaintiffs' and South Dakota Housing Authority's summary judgment motions in a memorandum opinion dated January 5, 2011. In that memorandum opinion this Court held that Plaintiffs Cathedral Square Partners Limited Partnership, 46th Street Partners Limited Partnership, and Riverview Park, Ltd. were entitled to summary judgment on the issue of whether their Housing Assistance Payments Contracts were breached by the shifting of the burden to the landlord to prove entitlement to annual rent increases, and further held that the South Dakota Housing Development Authority could not invoke the Overall Limitation Clause to limit its damages for breach of contract. See Cathedral Square Partners Ltd. P 'ship v. South Dakota Hous. Dev. Auth., 2011 WL 43019 (D.S.D. Jan. 5, 2011).
After HUD conceded in another case that the sue-and-be-sued clause of 42 U.S.C. § 1404a waives sovereign immunity regarding certain claims against HUD, South Dakota Housing Authority (SDHDA) moved for reconsideration and this Court granted the motion with regard to SDHDA's breach of contract claim. See Cathedral Square Partners Ltd. P 'ship v. South Dakota Hous. Dev. Auth., 875 F.Supp.2d 952 (D.S.D. 2012) (granting both Plaintiff West Park's and SDHDA's motions for reconsideration).
The parties engaged in settlement negotiations which ultimately resulted in SDHDA and all of the Plaintiffs but Riverview Park settling their claims. SDHDA moved for leave to file an Amended Third-Party Complaint against the Secretary of HUD (Doc. 136), and this Court granted the motion. Doc. 143. After this Court denied SDHDA and Plaintiff Riverview Park's Joint Motion for Final Judgment and Order to the extent that it requested declaratory relief concerning future annual rent adjustments (Doc. 152), SDHDA and Plaintiff Riverview Park submitted a joint statement that no issues remained from Riverview's Complaint to be decided at the scheduled July 23, 2013 trial. Doc. 156.
SDHDA filed its Amended Third-Party Complaint on February 1, 2013. Doc. 144. SDHDA's Amended Third-Party Complaint alleges in Count I, a claim for an Administrative Procedure Act violation;  in Count II, a claim for breach of contract; in Count III, a request for declaratory relief; and in Count IV, a claim for indemnification.
HUD has moved under Fed.R.Civ.P. 12(b)(1) and 12(c) for partial dismissal and judgment on the pleadings regarding SDHDA's breach of contract claim (Count II), in part, insofar as SDHDA seeks contract-based indemnification; as to the declaratory judgment claim (Count III), in part, insofar as SDHDA seeks relief regarding the two contracts that relate to Plaintiff Riverview Park, Ltd.'s property; and as to the agency-based indemnification claim (Count IV) in its entirety. HUD further moves to dismiss for lack of subject matter jurisdiction the remainder of the declaratory judgment claim (Count III), in which South Dakota Housing seeks relief as to 146 contracts that do not directly concern the named Plaintiffs' properties, and as to six contracts that relate to the properties of the Plaintiffs who have settled their claims with SDHDA. Doc. 145.
In the Joint Stipulation of Dismissal of Plaintiff's Claims, SDHDA represents: " Plaintiffs' dismissal of their claims shall not, however, preclude SDHDA from continuing its third party complaint against HUD to pursue recovery of costs and attorneys fees incurred by SDHDA in defending this action." SDHDA further represents: " Plaintiffs' dismissal of their claims shall not, however, preclude SDHDA from continuing its third party complaint against HUD pertaining to the Riverview Contract or the corresponding annual contributions contract between SDHDA and HUD for periods of time after September 30, 2012." Doc. 157.
Factual Backgroundas SetForth in Pleadings
Under Section 8 of the United States Housing Act of 1937, as amended, HUD subsidizes the rents of low-income tenants who reside in privately-owned dwellings. 42 U.S.C. § 1437f. The Section 8 program provides rent subsidies in one of two ways: either HUD enters into a housing assistance payments (HAP) contract directly with a private owner of multi-family housing units, or HUD enters into a Contributions Contract with a public housing agency and the public housing agency enters into a HAP contract with the owner. Under either scenario the HAP contract specifies a monthly Contract Rent the owner will receive for particular housing units. The tenant then pays the owner a percentage of the Contract Rent based on the tenant's income, and either HUD or the public housing agency pays the landlord the difference between the amount payable by the tenant and the Contract Rent in the form of housing assistance payments.
SDHDA entered into four HAP contracts with the four named plaintiffs in this action, and entered into four corresponding Contributions Contracts with HUD. Under these four Contributions Contracts, HUD provides annual contributions to SDHDA, and SDHDA then applies those annual contributions to its housing assistance payments to the plaintiff owners. SDHDA is a party to an additional 73 HAP contracts with persons or entities who are not parties to this case, and is a party to 73 corresponding Contributions Contracts with HUD.
In 1994 Congress amended Section 8 to place certain additional limitations on annual increases in Contract Rents. Pub.L. No. 103-327, 108 Stat. 2298, 2315 (1994). Subsequent statutory amendments cumulatively made the limitations in the 1994 amendments applicable to subsequent years. HUD issued Notice H 95-12 on March 7, 1995, for the purpose of implementing the revisions to Section 8 made by Congress. This directive imposed additional requirements beyond those contained
in existing HAP Contracts or the 1994 amendments.
SDHDA maintains it has administered the HAP Contracts for all of its Section 8 projects in accordance with Notice H 95-12 and the 1994 amendments, and has only adjusted Contracts Rents as directed and permitted by HUD. SDHDA further maintains it cannot grant Plaintiffs the relief they have sought in this action unless and until HUD directs or permits SDHDA to do so and provides the requisite funding. Since SDHDA maintains that the legal issues relating to the alleged breaches of Plaintiffs' HAP Contracts also affect future annual rent increases for some or all of the other Section 8 projects for which SDHDA has entered into involving similar HAP Contracts and Contributions Contracts, SDHDA contends it cannot properly and uniformly administer the Section 8 HAP Contracts to which it is a party without clarification of its legal rights and obligations with respect to the calculation of annual rent increases, and HUD's rights and obligations with respect to the calculation and funding of annual rent increases.
Standards in Determining a Motion to Dismiss under Fed.R.Civ.P. 12(b)(1) and 12(c).
Federal Rule of Civil Procedure 12(b)(1) provides that a court may dismiss an action for lack of subject matter jurisdiction. Under a motion to dismiss based on lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), the defendant may challenge either the plaintiffs complaint on its face or based on the factual truthfulness of the claims. Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993); Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990). The plaintiff carries the burden of showing that jurisdiction exists. V S Ltd. P'ship v. Dep't of Hous. and Urban Dev., 235 F.3d 1109, 1112 (8th Cir. 2000). " The district court has the authority to consider matters outside the pleadings on a ...